Clearwater reported sales of $114.0 million and adjusted EBITDA1 of $28.9 million for the third quarter of 2013 versus 2012 comparative figures of $101.6 million and $25.7 million. Free cash flows were $11.4 million versus $13.0 million in the third quarter of 2012. Margins improved 3.7 percentage points from 24.0 per cent in 2012 to 27.7 per cent for 2013.
Adjusted EBITDA for the third quarter of 2013 increased $3.2 million, or 12.3 per cent , as compared with the third quarter of 2012 due to a strong and growing market demand that improved sales prices for the majority of species. Margins were partially offset by higher clam and scallop harvest costs.
Free cash flow from operations improved in the third quarter of 2013 as a result of strong sales prices and volumes which contributed to improved margins. Demand remains strong for all species positively impacting margins. This was offset by higher capital expenditures from scheduled refits and vessel conversions, and the timing of payments to minority interest partners. Refer to the Management discussion and analysis for further information on free cash flow.
Year-to-date results
Clearwater reported sales of $277.6 million and adjusted EBITDA1 of $56.8 million for the 39 weeks year to date versus 2012 comparative figures of $257.4 million and $53.4 million. Year-to-date use of cash was $12.6 million versus $20.5 million in 2012. Gross margins improved 1.3 percentage points, to 22.2 per cent as compared with the same period in 2012.
Adjusted EBITDA for 2013 increased 6.2 per cent due to a strong and growing market demand that improved sales prices for scallops, lobster and snow crab. Margins were partially offset by higher clam, scallop and shrimp harvest costs.
In 2013 the use of cash improved by $7.9 million to $12.6 million as a result of improved margins and lower interest expense and the timing of dividend payments received from a joint venture.
Seasonality
Clearwater's business experiences a seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year while investments in capital expenditures and working capital are higher resulting in lower free cash flows in the first half of the year and higher free cash flows in the second half of the year.
Results for the 2013 third quarter and year-to-date period are consistent with Management's expectations and position the business to deliver on its annual targets for 2013.
When considering and seeking to understand seasonality, it is useful to look at rolling twelve month results. Rolling twelve month results include sales growth of 7.5 per cent to $370.6 million, adjusted EBITDA growth of 8.7 per cent to $75.6 million and growth in free cash flows of $30.5 million to $25.2 million.
Outlook
Global demand for seafood is outstripping supply, creating favorable market dynamics for vertically integrated producers such as Clearwater which have strong resource access.
Demand has been driven by growing worldwide population, shifting consumer tastes towards healthier diets, and rising purchasing power of middle class consumers in emerging economies.
The supply of wild seafood is limited and is expected to continue to lag behind the growing global demand. This supply-demand imbalance has created a market place in which purchasers of seafood are increasingly willing to pay a premium to suppliers that can provide consistent quality and food safety, wide diversity and reliable delivery of premium, wild, sustainably harvested seafood.
Clearwater, like other vertically integrated seafood companies, is well positioned to take advantage of this opportunity because of its licenses, premium product quality, diversity of species, global sales footprint, and year-round harvest and delivery capability.
Ian Smith, Chief Executive Officer, commented: "Management is pleased with the progress made in the third quarter and year-to-date periods and expects the Company to hit its annual targets for 2013."
Mr Smith continued: "Market demand for our products is strong and has contributed to improvements in revenue and free cash flow. As we continue to invest in our business and increase our access to supply, we expect to continue to deliver sustainable and profitable growth in 2014 and beyond."
